(Bloomberg) — Activist investor Cevian Capital AB, Rexel SA’s largest shareholder, backed the French electrical equipment supplier’s decision to reject an unsolicited takeover attempt by billionaire Brad Jacobs’ QXO Inc., saying the bid undervalued the company.
Rexel said on Sunday that its board rejected QXO’s non-binding offer of 28 euros to 28.40 euros per share, arguing that it “significantly undervalued” the company. Christer Gardell, managing partner at Cevian, said on Monday that Rexel had strong prospects for further value creation, supported by trends such as electrification, energy efficiency, reshoring and automation, as well as consolidation opportunities.
“We support the decision of the Rexel board to reject QXO’s proposal,” Gardel said in a written statement to Bloomberg News, adding that QXO’s indicative offer “failed to reflect the value of Rexel.”
Rexel, which distributes electrical products and other equipment to industries including utilities, builders and the automotive industry, rose 9.1 percent to 25.05 euros at the close of trading in Paris on Monday, giving the company a market value of 7.6 billion euros ($8.4 billion).
Cevian first invested in the company in 2016 and now owns a 23% stake, according to data compiled by Bloomberg. Cevian partner Marcus Alexanderson sits on Rexel’s board of directors.
QXO was founded by serial entrepreneur Brad Jacobs with the goal of becoming a leader in product distribution by acquiring and integrating existing players in the industry. Jacobs has pursued a similar strategy to found companies such as United Rentals Inc. and XPO Inc. QXO shares fell as much as 9.5% on Monday, their biggest intraday drop in nearly seven weeks. The company has a market value of about $5.5 billion.
Some analysts said Rexel management was right to reject what they viewed as a low-ball takeover bid. Eric Lemarie, an analyst at CIC Market Solutions, said Rexel was “better valued” because the company had changed and was well positioned to capitalize on the energy transition.
“We believe Rexel has significant upside, both organically and through M&A, particularly in the U.S., and we think Rexel is well-positioned to capitalize on that growth,” Citigroup analyst Martin Wilkie wrote in a note to clients. He said QXO’s offer gives the company an enterprise value of about 9.2 times its earnings before interest, taxes, depreciation and amortization, while a valuation of more than 10 times could be justified.
Cevian manages a portfolio of 10 to 15 European listed companies at a time, according to its website. The company is usually the largest or second largest shareholder in its portfolio, with an investment horizon of more than five years.
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